The Hidden OPEX Wake-Up Call: A Candid Conversation with Samuel C., Midwest Manufacturing
Sometimes the most expensive inefficiencies are the ones hiding in plain sight. Samuel C., owner of Chen Precision Components in Dayton, Ohio, recently completed a comprehensive indirect operational expense optimization that saved his 45-employee manufacturing company 22% on non-production costs—roughly $280,000 annually. But as Samuel candidly admits, these "back-office" improvements could have happened years earlier.
Chen Precision Components has been serving automotive and aerospace clients for 12 years, growing from a garage startup to an $8 million operation. The company's recent focus on indirect OPEX wasn't driven by production inefficiencies, but by Samuel's growing realization that thousands of dollars were disappearing through poor contract management, vendor relationships, and what he calls "autopilot spending." We sat down with Samuel to understand why smart business owners often ignore their most expensive blind spots.
ProfitParser: Samuel, you focused on indirect OPEX rather than production costs. What kept you from tackling contract management and vendor optimization earlier?
Samuel C: It's embarrassing, but I treated our indirect spend like utility bills—necessary evils you just pay without thinking. I was obsessed with production costs because those felt "real"—I could see raw materials going into products. But our legal fees, software subscriptions, facility contracts, professional services? Those felt like fixed costs of doing business.
The truth is, I was also overwhelmed by the administrative side. When you're trying to run production, manage customer relationships, and grow the business, renegotiating your waste management contract or auditing software licenses feels like a luxury. I kept thinking, "I'll get to that when things slow down."
You mentioned "autopilot spending." What assumptions did you have about these indirect costs that proved wrong?
Samuel C: The biggest misconception was that most of our contracts were "market rate" because we'd shopped around initially. What I didn't realize is that "initially" was often 5-7 years ago. Our insurance, legal services, accounting fees, even our coffee supplier—we were paying 2019 prices in 2024 without realizing alternatives had emerged.
I also assumed that switching vendors or renegotiating contracts was always disruptive and time-consuming. In reality, most of our biggest savings came from simple conversations. Our waste management company reduced our monthly fees by 30% just by optimizing pickup frequency. Our legal firm offered a 20% discount for predictable monthly retainer work instead of hourly billing.
So what finally forced your hand to prioritize indirect spend management?
Samuel C: Two wake-up calls hit within a month. First, I discovered we were paying for three different project management software subscriptions because different departments had signed up independently. Nobody was intentionally wasting money, but we had zero visibility into what we were actually spending on what.
Second, a competitor mentioned their new accountant saved them $40,000 annually just by restructuring their vendor relationships. That's when I realized: while I was obsessing over raw material costs that maybe I could improve by 3-5%, I was completely ignoring indirect spend where 15-25% improvements were sitting there waiting.
Looking back, how much money do you estimate you left on the table by not managing these costs proactively?
Samuel C: Conservatively, about $900,000 over the past five years. We're saving $280,000 annually now on indirect OPEX, and most of these savings required minimal effort once I actually focused on them. That doesn't include the compounding effect—money we could have reinvested in equipment or growth.
What really stings is that our biggest single saving was $45,000 annually on insurance, achieved with two phone calls to get competitive quotes. Two phone calls. That's been available money for years, and I just never made the calls.
Walk us through how you approached systematic indirect spend optimization.
Samuel C: Step one was creating visibility. We spent two weeks cataloging every recurring payment over $200 monthly. The list was shocking—87 different vendors and service providers. I had no idea we were doing business with that many companies.
We categorized everything: facilities, professional services, software/technology, insurance, utilities, and what I call "ghost spend"—things we were paying for but couldn't immediately explain why. Then we tackled each category systematically, starting with the biggest dollar amounts.
The key insight was treating vendor relationships like customer relationships. Instead of adversarial negotiations, we approached conversations as: "We want to continue working together, help us understand our best options."
What hidden costs or "ghost spend" shocked you the most when you finally dug in?
Samuel C: We were paying $8,400 annually for a software license that only two people had ever used, and neither had logged in for eight months. We were paying for premium internet speeds at our old facility—three years after moving. Our legal retainer included research hours we never used, but we were paying for them anyway.
But the real shocker was vendor overlap. We had four different companies providing various IT services, with significant overlap in capabilities. Consolidating to one primary IT partner saved us $28,000 annually while actually improving service quality.
What methods proved most valuable in identifying these inefficiencies?
Samuel C: A simple spending audit was transformative. We pulled 18 months of expenses and categorized every payment over $500. Just seeing the patterns—how much we spent on legal fees, software, facility costs—created awareness we'd never had.
We also implemented what I call "contract calendars." Every service agreement now has a review date 60 days before renewal. This simple system has saved us thousands by preventing automatic renewals at outdated rates.
The best discovery was competitive benchmarking. I joined two industry associations and started having honest conversations with other owners about what they were paying for similar services. That's how I learned our payroll processing fees were 40% higher than industry average.
How did you handle vendor renegotiations without damaging important relationships?
Samuel C: The key was approaching it as partnership optimization, not cost-cutting demands. Instead of "we need to pay less," I'd say "we're reviewing all our vendor relationships to ensure mutual success. Help me understand our best options moving forward."
Most vendors were surprisingly cooperative. Our insurance broker actually thanked us for the conversation because it helped them identify coverage we didn't need and policies that had become outdated. Our accountant used the opportunity to propose additional services that made financial sense.
When vendors couldn't meet competitive rates, we gave them reasonable notice and often referred them to other businesses. Ending relationships professionally has actually led to referrals and consulting opportunities.
Beyond cost savings, what other benefits have you seen from managing indirect spend proactively?
Samuel C: We have dramatically better visibility into our true operating costs, which improves pricing decisions and budgeting accuracy. Our vendor relationships are stronger because we're actively managing them instead of taking them for granted.
We've also reduced administrative burden by consolidating services. Instead of dealing with four IT vendors, two insurance brokers, and three facility service companies, we have streamlined relationships that require less management time.
But honestly, the biggest benefit is confidence. I now know we're getting competitive rates and appropriate service levels. When budget pressures arise, I'm not wondering what costs could be optimized—I know we're running efficiently.
What would you tell other SMB owners who haven't systematically reviewed their indirect spend?
Samuel C: Start with a simple spending audit. Export 12 months of expenses and sort by vendor. You'll immediately spot opportunities—duplicate services, forgotten subscriptions, vendors you're paying but not actively managing relationships with.
Don't try to renegotiate everything at once. Pick your five largest indirect expenses and get competitive quotes. Even if you don't switch vendors, having current market information gives you negotiating power.
Most importantly, treat vendor management like customer management. Schedule regular reviews, maintain competitive awareness, and remember that good vendors want long-term relationships with profitable customers. The conversation isn't adversarial—it's strategic.
Set aside four hours monthly for vendor relationship management. That time investment will typically return 10-15x in savings and improved service quality.
Any final thoughts for business owners who've been putting this off?
Samuel C: Every month you delay is literally money walking out the door. These aren't one-time savings—they're recurring improvements that compound over years. The $280,000 we're saving annually will be $1.4 million over five years, assuming no additional improvements.
Your vendors aren't going to volunteer to reduce your costs. Market rates don't automatically adjust your existing contracts. The only way to capture these savings is to actively manage these relationships.
And here's the thing—your competitors who are managing their indirect spend proactively have a cost advantage you're giving them by default. Every dollar they save on non-production costs is a dollar they can invest in growth, equipment, or competitive pricing.
The work isn't glamorous, but the results are real money that goes straight to your bottom line.
Samuel's experience highlights a common blind spot among growing businesses: the assumption that indirect costs are fixed or optimized by default. His systematic approach to vendor management and contract optimization demonstrates that some of the highest-return activities in business are also the most overlooked.
For business owners ready to tackle their own indirect OPEX optimization, Samuel's methodology offers a clear path: create visibility through spending audits, approach vendor relationships strategically, and remember that the money you don't review is money you're probably overpaying.